Sunday, September 13, 2015
DEJA VU! IS CONDO CRAZE REPEATING ITSELF?
Those of us of a certain age will remember the "condo craze" of the late seventies and early eighties when at its zenith, developers were buying up hundreds of thousands of apartment buildings all over the country, but especially New York City, and turning the units into a buying opportunity for the tenants (and easy money for the developers). The tenants had to make a decision: 1) to purchase the unit - if it were developed into a condominium, 2) buy shares in the unit - if it were developed into a cooperative, or 3) move out and find another place to live The first two options made you an "owner" of your own home. That was a good thing. Right?
The downside was that you were otherwise forced to leave your community of friends and neighbors because you didn't want to own, or didn't have the money to purchase your apartment.
In a recent New York Times article, reporter Julie Satow describes how developers and/or investors are acquiring a "supermajority" [usually 75 percent of shares] of apartments in a building, and then maneuvering to evict any holdouts.
"Former shareholders then revert to either rent-stabilized tenants or market-rate tenants, in which case they could be evicted," stated Gary M. Rosenberg, founding partner of Rosenberg & Estis. He states that in most cases, shareholders retain their shares, which results in an eventual payout once the developer sells the building . . . and if those shareholders have mortgages, the proceeds from the sale are used to pay off the loans.
Unfortunately, that provides little comfort to those who simply want to stay put. The article describes how former advertising executive Todd Seibert, 75, who owns the top floor of a four-story co-op at 150 East 78th Street, has been forced to seek legal counsel. His attorney, Adam Leitman Bailey, won an injunction to stop the "collapse" of the cooperative.
Some are happy about a potential buy-out; others not so much. If you fall under the latter category, you might need to take a closer look at your bylaws, get on the board of directors, and discuss the potential of a forced eviction.
This writer [and former tenants rights activist] remembers the 1982 conversion of over 1200 units of a two-tower apartment house (The Promenade) in Bethesda, Maryland into cooperatives. Despite a two-year protest and lawsuit, the tenants were unable to stop the conversion of their building that was bought by the Gouletas brothers and sister Evangeline for $32,000,000, who turned around and priced the units to sell out at $100,000,000, with only cosmetic changes. To date, the units are primarily occupied by tenants, most investor-owned (not investor-occupied). The lawsuit and tenants protests ultimately resulted in the Maryland Condomium Act of 1984 which required that any future developers set aside 20 percent of the units for the lower-income, the elderly, and/or the handicapped. It did not apply retroactively to the tenants of The Promenade Apartments.
For more details, see New York Times article, "How the Co-op Crumbles" by Julie Satow, September 6, 2015.